Steel situation in Europe
2020 was the year of challenges, and this can be said openly after the past period. The coronavirus and the economic downtime it has caused have also put economic operators in Europe in an extreme situation. After the summer of 2020, many people thought that the steel market would collapse and basic material prices would hit unprecedented lows. However, this market - many people who have worked in this business for several decades will surely agree with me – never leaves much room for stability and predictability. Somewhere this is also the beauty of the profession. The last quarter of 2020 already resulted in economic open-ups, European steel production, which faced the sudden situation and which produced 130 million tonnes instead of the 180 million tonnes, was soon unable to keep up with the increased demand. The world's major steel-using countries (China waking up earlier from the coronavirus, and the USA) have announced huge increased demand in a short period of time, thus, import materials were sold out very quickly and resulted in significant export target markets for European factories. If that hadn’t been enough for the rapid closing of supply/demand gap, several European production plants faced extreme difficulties, at the very worst time. Raw/basic material prices - parallel to the sudden increased demand – began to increase like never seen before (to the following heights: iron ore 225 USD/ton, scrap-metal 500 USD/ton).
The above mentioned beginning soon resulted in an increase that was giving also the lie to the rise period after the crisis in 2008, mainly in the case of hot rolled coils and roll-based products (pipe/ hollow section). Increased mechanical and automotive demand has also dragged on the prices of more complex products (alloyed/ drawn products). Production capacities started to run out very quickly on the markets, soon the rollings of 2021 became questionable, and some products have almost completely disappeared from supply chains (cold plate, galvanised materials). Basic materials have increased to an unprecedented extent due to supply problems, by June 2021, the rate of increase reached 150-200% for certain products. Purchasing opportunities were constantly reduced, several factories could not decide for themselves whether they were on the market or not. The biggest problem for many end-users was that suppliers of almost 100% of certain products have simply disappeared from the offer markets, and suddenly it was necessary to look for alternative sources in an already material deficient purchasing situation. The problems caused by the rising wave following the lack of coils have been exacerbated by the unprecedented increase in construction products over the past 3 months, in a short period of time there was also a 50% increase in long steel product prices.
This period was not easy for our company either. The usual supplier volumes decreased, several suppliers have been working with daily options, quick decisions hade to be made and the associated high price risks hade to be taken on. Of course, a rising period in the life of a trading/service company provides good opportunities to generate extra profits, but the biggest challenge of that period was to serve our existing partners and our new partners who have contacted us due to the lack of sources, that have been secure so far. In many cases, there were more immediate requests for a product than stocks, thus, difficult decisions had to be made in order to ensure that the production of our partners does not stop, and that our end-users do not suffer greater damage due to lack of basic materials. You can negotiate at the price, that's the trade we exist in, but if there is no basic material, that is the worst situation. In several cases we have drawn our partners’ attention to ensure their needs in advance.
What to expect in the future? I think that at the end of the summer 2021, no one knows for sure. European basic material supply remains deficient (the 2021 European total production forecast remains at only 158 million tonnes). In some materials, booking capacitys of several products has already been reserved for 2021, in many cases there are new offers only for 2022. The European/ US antiduty decision is a big question and could be a gamechanger, and also further import restrictions are under negotiations, which can rapidly turn tides in the steel demand / production cycle. Economies, which make up a significant part of steel consumption, have received/receive additional support to raise GDP, this could ensure a stable existence of demand by 2022 as well. Of course prices could see some corrections in Q4 2021 caused by many factors (China demand downturn, raising capacities, Covid 4th wave), but I beleive economic groth worldwide has good potential in 2022, and materials will be needed.
For thyssenkrupp Materials Eastern Europe, it will continue to be important to ensure the supply of basic materials to our partners, even in difficult situations. The price is important, but the most expensive is, what doesn’t exist. Thank you for honoring us by purchasing at our company and using our services, we hope to travel together on the market rollercoaster in the coming years.
thyssenkrupp Materials Hungary and Slovakia